After the British Pound weakened considerably in response to dovish minutes from the BoE’s most recent interest rate decision, traders fears that the depreciation was overdone. This is because most analysts had already priced-in the fact that policymakers will not wish to alter monetary policy until after the June 23rd referendum vote. Not even weaker-than-forecast British Construction output was enough to offset Sterling gains today.

The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7937 to 0.7976 during Friday’s European session.

Previously…

Euro Edges Higher Vs. Pound on Eurozone Inflation Figures

Following the publication of the Eurozone’s final inflation figures for March, the Euro to Pound exchange rate managed to record a modest gain.

On the year, March’s Eurozone Consumer Prices came in at 0.0%, bettering the median market forecast -0.1%.

The EUR/GBP exchange rate also experienced modest fluctuations following the Bank of England’s (BoE) interest rate decision. As expected, the BoE opted to leave interest rates on hold for an 85th month.

While the BoE warned about the potential negative repurcussions of a ‘Brexit’, it also indicated that borrowing costs could be increased if the UK voted to stay in the EU.

The Euro to Pound exchange rate is currently trending in the region of 0.7963

Earlier…

UPDATE

Eurozone Industrial Production data failed to impress having failed to meet with expectations on both a monthly and annual basis. As a result, the Euro to Pound Sterling (EUR/GBP) exchange rate declined by around -0.6% on Wednesday afternoon.

Towards the close of Wednesday’s European session, the Euro to Pound Sterling (EUR?GBP) exchange rate was trending in the region of 0.7935.

Amid concerns regarding the European Central Bank’s (ECB) accommodative policy outlook, German banks are complaining about ultra-low rates causing a ‘gaping hole’ in savers’ finances and pensioners’ retirement plans. Some analysts believe that this could threaten citizens’ readiness to push for further integration in Europe.

‘It is undisputable that the policy of low interest rates is causing extraordinary problems for the banks and the whole financial sector in Germany,’ said German Finance Minister Wolfgang Schaeuble. ‘That also applies for retirement provisions…That is why I always point out that this does not necessarily strengthen citizens’ readiness to trust in European integration.’

This issue has limited the appeal of the single currency, especially with the prospect of a British exit from the European Union already calling into question the future of a more integrated Europe.

Later today, Eurozone Industrial Production data may cause Euro movement. Additionally, the US Advance Retail Sales report should impact the single currency thanks to EUR/USD negative correlation.

After domestic data showed that the UK’s inflation rose by 0.5% between March 2015 and March 2016, the Pound erased two-weeks’ worth of losses versus the single currency. The improvement in inflation didn’t have a massive impact on overall Sterling gains, however, given that consumer prices remain well below the Bank of England’s (BoE) target.

‘Dearer clothing and higher air fares, influenced by the timing of Easter, are behind the rise in CPI, which is still low by historic standards,’ said ONS statistician Phil Gooding.

With a complete absence of domestic data to provoke volatility, the British Pound is likely to see movement in response to political developments. With the most recent opinion polls showing that the vote for the UK to leave the EU is higher than the vote to stay, sentiment towards the UK asset remains damp.

GBP/EUR Exchange Rate Forecast: BoE Rate Decision in Focus

Although Eurozone Industrial Production and US Advance Retail Sales data has the potential to cause EUR/GBP exchange rate movement, trader focus is likely to be dominated by Thursday’s Bank of England (BoE) interest rate decision.

Whilst the BoE are not expected to alter policy outlook at this time, it will be interesting to see if the latest inflation figures have prompted some policymakers to consider preparing for a rate hike.

Eurozone consumer prices data for March will also be significant for those trading the EUR/GBP exchange rate.

The Euro to Pound Sterling (EUR/GBP) exchange rate was trending within the range of 0.7922 to 0.7984 during Wednesday’s European session.